Turnaround strategy: What Vodafone Idea 2.0 will look like

After its successful follow on public offer ( FPO) Vodafone Idea has announced plans to commence 4G coverage expansion within the next 3-4 months

Vodafone Idea is all set to implement a turnaround strategy. As part of that strategy, the company will push to retain its premium clientele while bolstering its digital presence with a sharp focus on premiumisation.

Sources who have reviewed the telecom operator’s turnaround plan, which was presented to investors, told Moneycontrol that the company’s foremost objective will be to retain its existing user base, particularly those with high average revenue, across its 17 priority circles.

According to the sources, the company will also explore ways to add more high-paying subscribers. To this end, Vodafone Idea plans to actively expand its distribution channels and intensify its digital outreach for customer acquisition.

Additionally, the company aims to enhance what it has on offer for current customers through strategic partnerships. For instance, two partnerships have already been signed for entertainment, content and cloud gaming.

Abhijit Kishore, COO, Vodafone Idea, told Moneycontrol that the company continues to invest in customising solutions and enhancing customer service to improve retention. “We are committed to provide our users with unique offerings and enhance their overall experience,” Kishore said.

The company has implemented a number of customer initiatives, such as specialised desks to fast-track customer redressal at every Vi Store, highly skilled customer support on helplines, and digital distribution plans (distribution through the app rather than through a store).

Priority circles

Currently, Vodafone Idea operates in 23 circles across India. “Vi has 15 per cent-plus revenue market share in 14 circles, and these circles contribute 70-75 percent of its total revenue. We would expect it to focus on these circles in terms of the network (4G expansion and 5G launch), as well as sales and distribution,” Ashwinder Sethi, principal at consulting firm Analysys Mason, told Moneycontrol.

Sethi said that the telco is expected to target protecting its existing customers especially high ARPU or premium customers in these circles, as retention is even more critical than subscriber addition for Vi at this stage.

Shiv Putcha, founder and principal analyst at Mandala Insights, underscores the necessity for Vodafone Idea to cater to both the premium and entry-level segments. While premium users may witness tariff adjustments, entry-level users are likely to benefit from bundled offerings without tariff hikes.

After its successful follow-on public offer (FPO), Vodafone Idea has announced plans to commence 4G coverage expansion in 17 priority circles within the next 3-4 months. It expects to take 12-15 months to narrow the gap with competitors Reliance Jio and Bharti Airtel.

Furthermore, the company aims to initiate its 5G rollout within six months, all of which analysts feel will be closely monitored in the near to medium term.

Network upgrades

Analysts feel that the centrality of Vodafone Idea's turnaround strategy lies in expediting 4G network upgrades and 5G deployment in pivotal markets. In addition, they believe a selective approach to capital expenditure, a focus on priority markets, and differentiation in the 5G experience to attract premium users and enhance Average Revenue Per User (ARPU) will serve the company well.

“In terms of go-to-market, the Capex will be spent on select, priority markets only. This is not only because of funding availability but they need to take a different approach to the incumbents, Jio and Airtel. Vi will have a split market approach. That is, one obvious area is to deploy 5G in key markets and add a lot of capacity that they do not have right now,” Putcha said.

Neil Shah, Vice President of Research at market intelligence company Counterpoint, said that Mumbai, Gujarat, Kolkata, Kerala, Delhi, Haryana and UP-West will be potential 5G markets where the company can target premium customers.

Shah added that Vi would have to chart out a strategy to transition its 125 million 4G user base to the 5G data network once it is made available. “The next phase would be to focus on entry-tier 2G and 4G data users circle by circle, depending on their rollout and coverage plan.”

Strategic initiatives

Vodafone Idea Chief Executive Officer Akshaya Moondra recently highlighted the company's forthcoming strategic initiatives, which are centered on partnerships and digital revenue streams.

Moondra told Moneycontrol in a recent interview that the telecom operator aims to become an integrated digital services provider, with an eye on digital engagement and monetisation opportunities.

To this end, Vodafone Idea is enhancing its Vi App and looking to transform it into a multifaceted platform offering entertainment, live TV, gaming, and digital marketplace services across various categories.

While Vodafone Idea continues to collaborate with internet service providers to provide bundled content and mobility offerings, Moondra has clarified that there are no immediate plans to invest in the Fibre broadband segment, where the company maintains a limited presence through its subsidiary You Broadband.

Analysts said that the telco must look at expanding the fixed mobile convergence (triple play) with digital content to more circles which could help it capture a greater consumer surplus and boost ARPU.

The telco is partnering with other internet service providers to provide bundled content and mobility offerings with fibre-to-home broadband. It already offers limited fiber broadband service through its subsidiary, You Broadband

Moondra, however, clarified last week that the telco does not have plans to invest in the Fiber broadband segment but will continue to have a small play there through You Broadband.